======================= HES POSTING ==================== Andrews, David R wrote: > On p. 40 of the General Theory Keynes wrote: > > "To say that net output to-day is greater, but the price-level lower, > than ten years ago or one year ago, is a proposition of a similar > character to the statement that Queen Victoria was a better queen but not > a happier woman than Queen Elizabeth -- a proposition not without meaning > and not without interest, but unsuitable as material for the differential > calculus. Our precision will be a mock precision if we try to use such > partly vague and non-quantitative concepts as the basis of a quantitative > analysis." > > Am I missing something, or is this a rejection of the concept of the price > level as a theoretically useful tool? Isn't the price level still an > important concept in macrotheory? Has Keynes been refuted or has this > view been seriously discussed in the Keynes literature? > > David Andrews > [log in to unmask] > There are enormous conceptual, empirical, and practical problems in constructing price and quantity indices. All these problems go away if we consider only very small changes (from year to year, say). But the moment you start comparing the price "level" today or the output "level" today to that of a century ago, index-number problems make it very hard to figure out what you should do (or even if there is anything you can do) to produce _the_ answer. Brad De Long "Now 'in the long run' this [way of summarizing the quantity theory of | <[log in to unmask]> money] is probably true.... But this | Brad De Long **long run** is a misleading guide to | Dept. of Economics current affairs. **In the long run** | U.C. Berkeley we are all dead. Economists set | Berkeley, CA 94720 themselves too easy, too useless a | (510) 643-4027 283-2709 task if in tempestuous seasons they | (510) 642-6615 fax can only tell us that when the storm | http://econ161.berkeley.edu/ is long past the ocean is flat again." --J.M. Keynes ============ FOOTER TO HES POSTING ============ For information, send the message "info HES" to [log in to unmask]